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New Zealand whole milk powder options

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  • Pakorn Aschakulporn
  • Jin E. Zhang

Abstract

This paper studies the New Zealand (NZ) dairy derivatives, specifically, whole milk powder (WMP) options, which have been the most actively traded options in NZ since their inception in November 2011. Using the methodology of Zhang and Xiang, the dynamics of the implied volatility smirk of WMP options is documented. Overall, the level, slope and curvature were found to be 0.2625, −0.0194 and 0.0756, respectively. Modifying the CBOE VIX methodology, the NZ Dairy Volatility Index is created; this exhibits a downward trend and is the second‐best predictor of WMP returns, after curvature, in the latest subsample – after 26 June 2017.

Suggested Citation

  • Pakorn Aschakulporn & Jin E. Zhang, 2021. "New Zealand whole milk powder options," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(S1), pages 2201-2246, April.
    • Handle: RePEc:bla:acctfi:v:61:y:2021:i:s1:p:2201-2246
    DOI: 10.1111/acfi.12660
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    References listed on IDEAS

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    Cited by:

    1. Jungah Yoon & Xinfeng Ruan & Jin E. Zhang, 2022. "VIX option‐implied volatility slope and VIX futures returns," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 42(6), pages 1002-1038, June.
    2. Wei Guo & Xinfeng Ruan & Sebastian A. Gehricke & Jin E. Zhang, 2023. "Term spreads of implied volatility smirk and variance risk premium," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 43(7), pages 829-857, July.

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